Introduction to the Failure of Banks

As the economic depression deepened in the early 30s, and as farmers had less and less money to spend in town, banks began to fail at alarming rates. During the 20s, there was an average of 70 banks failing each year nationally. After the crash during the first 10 months of 1930, 744 banks failed – 10 times as many. In all, 9,000 banks failed during the decade of the 30s. It's estimated that 4,000 banks failed during the one year of 1933 alone. By 1933, depositors saw $140 billion disappear through bank failures.

History of the Beginning of Bank Closures

This video gives a summary of what had happened when the beginning of bank closures. and the reactions of all the people who's money was being lost

Gresham, Nebraska in 1933

This picture was taken outside a local bank which closed in Gresham, Nebraska in 1933.There are people looking around the bank confused as to what was happening and where all their money had gone.

Peoples’ Wayne County Bank in Detroit

This picture is taken at the Peoples’ Wayne County Bank located in Detroit. There are Depositors waiting in queue to collect their savings back. In other places there were not as peaceful and patient people waiting for their money back.

American Union Bank

This picture was taken at the American Union Bank.They are also lined up to get their money out of the bank which would be difficult considering the bank didn't have that money available for those people.

Gresham, Nebraska in 1933

This picture was taken outside a local bank which closed in Gresham, Nebraska in 1933.There are people looking around the bank confused as to what was happening and where all their money had gone.

Peoples’ Wayne County Bank in Detroit

This picture is taken at the Peoples’ Wayne County Bank located in Detroit. There are Depositors waiting in queue to collect their savings back. In other places there were not as peaceful and patient people waiting for their money back.

American Union Bank

This picture was taken at the American Union Bank.They are also lined up to get their money out of the bank which would be difficult considering the bank didn't have that money available for those people.

What accounted for the dramatic decrease in bank failures after 1933

The Fed had promised unlimited amounts of cash to the banks after FDR’s bank

holiday and the Emergency Banking Act. The Act established deposit insurance known as the FDIC. The Fed had raised the price of gold which was good for them but it was reducing the value of all the Federal Reserve Notes held by all the citizens who had handed over their gold. It wasn’t Roosevelt and his bank holiday or the Emergency Banking Act that saved the banks. It was the confidence that the citizens had in the system that saved the banks. Their constant hope in Roosevelts system kept them bringing more and more money that they had owed years ago which was helping the banks reopen their doors.

Walter Schmitt

Walt Schmitt was a man that had actually lived through the time of the depression and gave an interview about what he had seen and experienced in this time. During this interview he gives testimony about what happened to banks and their bosses.

The Bank's Rapid Changes from 1928 to 1933

As you can see from our graph below, the number of bank closures steadily increase between 1928 to 1931. There is a sudden decrease from 1931 to 1932, however the rate of closures continued at a marked rate until 1933.

Louise Doughtry

Louise Doughtry also gives testimony about an experience from her father, though in her case her father was a bank owner. She tells the audience about the ups and downs of a bank from an owners perspective.